US stocks rise after CPI data comes in cooler than expected

Stocks rose overnight after new data raised hope that the Federal Reserve can bring down inflation without pushing the US economy into a recession.

The consumer price index rose 3 per cent on a year-over-year in June. Economists polled by Dow Jones expected a 3.1 per cent increase. Month over month, the index rose 0.2 per cent last month, also less than forecasted. On top of that, core CPI – which strips out volatile food and energy prices – rose less than expected.

June data for the producer price index – another well-watched gauge of inflation – is due tonight.

However, the market is pricing in an approximately 92 per cent chance the Fed raises interest rates at the July meeting, according to CME’s FedWatch Tool.

Although Goldman Sachs' economists are indicating the end of Federal Reserve tightening with a final rate hike in July, followed by unchanged policy for the rest of the year, as the report shows encouraging disinflation trends and mixed performance across categories.

Overall, the broad market index advanced 0.74 per cent to hit a new high for 2023 . The Dow Jones Industrial Average traded 86.01 points higher, or 0.25 per cent, to close at 34,347.43. The Nasdaq Composite popped 1.15 per cent to 13,918.96. The S&P 500 and the Nasdaq closed at their highest levels since April 2022.

Large technology firms, including Nvidia and Meta Platforms, saw their stocks rise by 3.5 per cent and 3.7 per cent respectively.

Biotech company Recursion Pharmaceuticals experienced a significant 78 per cent surge after receiving a $50 million investment from Nvidia.

Domino's Pizza gained 11 per cent following a deal with Uber Technologies to list its menus on Uber's food-delivery apps. This marked a shift in Domino's stance towards food-delivery companies.

Regional banks such as Comerica, Zions Bancorp, and KeyCorp performed well in the S&P 500.

In commodity news, Brent crude surpasses $80 per barrel due to tightening supplies, slower US inflation, and increased domestic demand, while oil majors BP and TotalEnergies secure a lucrative German offshore wind site auction, highlighting the growing appeal of renewable energy assets in Europe.

The IEA foresees sufficient supply of critical minerals by 2030 to support climate pledges, with lithium supply nearing demand levels and improvements in the overall supply picture; however, project delays, cost overruns, and the need for diversification from key nations pose potential risks to meeting climate goals.

Overall, all US sectors except for Industrials and Health Care closed higher. Communication Services was the best performer.

Futures

The SPI futures are pointing to a 0.9 per cent gain.

Currency

One Australian dollar at 7:20 AM was buying 67.87 US cents.

Commodities

Gold added 1.27 per cent. Silver jumped 4.42 per cent. Copper gained 2.31 per cent. Oil added 1.23 per cent.

Figures around the globe

European markets closed higher. London’s FTSE added 1.83 per cent, Frankfurt rose 1.47 per cent, and Paris closed 1.57 per cent higher.

Turning to Asian markets, Tokyo’s Nikkei fell 0.81 per cent, Hong Kong’s Hang Seng gained 1.08 per cent and China’s Shanghai Composite closed 0.78 per cent lower.

The Australian sharemarket closed 0.38 per cent higher at 7136.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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